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We analyze the consequences of habit formation for income levels and long-term growth in an overlapping generations model with dynastic altruism and resource dependence. If the
strength of habits is below a critical level, the competitive economy displays an altruistic (Ramsey-like) equilibrium where consumption sustainability obeys the Stiglitz condition, and
habits yield permanent e¤ects on output levels due to transitional e¤ects on growth rates, capital pro tability and speed of resource depletion. If the strength of habits is above the
critical threshold, the economy achieves a sel sh (Diamond-like) equilibrium in which habits increase growth rates and resource depletion even in the long run, sustainability conditions are
less restrictive, consumption and output grow faster than in Ramsey equilibria, but welfare is much lower. Results hinge on resource dependence, as di¤erent depletion rates modify the
intergenerational distribution of wealth and thereby the growth rate attained in either equilibriumShow more